Brexit: Japanese bank Sumitomo Mitsui becomes latest to open Frankfurt subsidiary

The decision was made to 'ensure that Sumitomo Mitsui Banking Corporation can continue offering banking services to clients with no disruption once the UK leaves the EU'.

The Japanese giant will register its core banking unit in the German city as it fears its UK subsidiary “could face future restrictions” once Britain crashes out of the EU (SMBC)

Sumitomo Mitsui Financial Group (SMFG) has become the latest financial firm to open a subsidiary in Frankfurt in the wake of the Brexit vote.

The Japanese giant will register its core banking unit in the German city as it fears its UK subsidiary “could face future restrictions” once Britain crashes out of the EU.

The company said the decision was made to “ensure that Sumitomo Mitsui Banking Corporation can continue offering banking services to clients with no disruption once the UK leaves the EU”.

“The purpose of this expansion is to increase the flexibility of SMFG's marketing and operations structure so that it can continue to offer financial services to its clients with no disruption following the planned withdrawal of the UK from the EU,” it said in a statement.

A number of banks have announced similar contingency plans after Prime Minister Theresa May confirmed Britain will ditch the single market, which would subsequently see City firms lose passporting rights that provide wide-ranging EU access for UK-based financial services firms.

Fellow Japanese bank Daiwa has also confirmed it had settled on Frankfurt as the location for its new EU subsidiary, with plans to submit its licence application to German regulator Bafin by year-end.

Nomura is also on track to expand its operations in Frankfurt and Standard Chartered confirmed in May it had contacted the regulator about setting up a subsidiary in the city where it already has a presence.

Others such as JP Morgan, which currently has 16,000 staff in the UK, is to ramp up operations at a number of its EU sites, with plans to move up to 1,000 London jobs to offices in Frankfurt, Luxembourg and Dublin in light of Brexit.

It comes as business leaders from the City prepare to send a delegation to Brussels with a proposal for a post-Brexit free trade deal for financial services as fears grow for the sector, with Government ministers sending increasingly confused messages about their plans for the Square Mile.

The head of the German city's lobby group, Frankfurt Main Finance, said Brexit had started “to bite”, adding that at least 12 banks will set up shop in the country's financial centre at the expense of London.

Hubertus Vath said: “Japanese banks warned early on about the consequences of Brexit and accordingly have taken the lead.

”With Sumitomo Mitsui, the third Japanese banking group has chosen the financial centre Frankfurt.

“Frankfurt Main Finance expects a total of at least 12 banks to announce their decision for Frankfurt this year.”

PA